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Dana Gas Posts Lower Profit, Says Kurds Try to Strip Iraq Assets

Nov. 4 (Bloomberg) -- Dana Gas PJSC, an energy producer forced to restructure debt last year, said third-quarter profit fell amid faster depreciation of assets in Egypt and as Kurdish authorities tried to sell company holdings in Iraq.

Net income slipped 2 percent to 102 million dirhams ($28 million), from 104 million dirhams a year earlier, Dana Gas said in a statement today to the Abu Dhabi stock exchange. The company is owed 2.78 billion dirhams in total trade receivables, mostly in Iraq and Egypt.

Dana Gas, based in the United Arab Emirates sheikdom of Sharjah, changed terms on about $1 billion in Islamic bonds, or sukuk, last year after the Egyptian and Iraqi governments delayed payments for fuel. These receivables and the global financial crisis hampered its efforts to refinance.

Ashti Hawrami, natural resources minister of Iraq’s semi-autonomous Kurdistan Regional Government, approached several outside “parties” about selling Dana Gas’s stake in the Chemchemal natural gas field in the north of the country, Chief Executive Officer Patrick Allman-Ward said on a conference call today. He didn’t identify any of the parties.

“That was in breach of the contract and disregarding the sanctity of that contract and disregarding the rule of law, and we felt that was a significant escalation of the dispute” between Dana Gas and the KRG over oil payments, he said. “We are still ready and willing and hoping for an amicable solution to this situation.”

Neither Hawrami’s spokesman nor his adviser answered separate calls to their mobile phones seeking comment on the accusation.

Seeking Arbitration

Dana Gas began arbitration proceedings in London on rights and money owed from the energy development contract it signed with the KRG in 2007, according to an Oct. 22 company statement to the Abu Dhabi bourse.

In Iraq, Dana Gas trade receivables grew to 1.65 billion dirhams at the end of September from 1.47 billion dirhams at the end of June, according to the statement. In Egypt, the company was owed 1.09 billion dirhams at the end of September, up from 960 million dirhams at the end of June.

“We are not going to be making any material additional capital expenditures in Egypt of course until we have redressed or addressed the receivables issue,” said Allman-Ward. Dana Gas hopes the Egyptian government will sign a contract for exploration at the Block 6 offshore Al Arish area by the end of the year, he said.

Outside Iraq, Egypt and the United Arab Emirates, where the company already operates, Dana Gas is looking for investment opportunities in the region, with “a number of possible opportunities that we hope will be coming close to fruition in the very near future,” he said.

Dana Gas’s production of oil, gas and other fuels increased 17 percent in the third quarter to an average of 66,850 barrels of oil equivalent per day compared with the same three months of 2012, according to the statement. Gross revenue gained 21 percent to 623 million dirhams.

To contact the reporters on this story: Nayla Razzouk in Dubai at nrazzouk2@bloomberg.net; Anthony DiPaola in Dubai at adipaola@bloomberg.net

To contact the editor responsible for this story: Stephen Voss at sev@bloomberg.net

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